Van McKellar | Partner

Don’t let dilapidations leave your finances in ruins

During the last recession there was a significant increase in the number of disputes over schedules of dilapidations. Landlords were making every effort to avoid being left with an empty property in poor condition particularly where there was a risk of the tenant becoming insolvent. As landlords sought to enforce repairing obligations and tenants sought to minimise their liability, disputes ensued.

What are Dilapidations? At the end of a commercial lease, the Landlord will generally notify the departing tenant of required repairs by serving a Schedule of Dilapidations. Essentially they are breaches of the ‘repairing’ obligations. A Schedule of Dilapidations simply quantifies the Landlord’s loss.

Schedules can also be served during the currency of the lease in order to establish what needs to be done to ensure the tenant is fulfilling his obligations. The purpose of serving a Schedule is to establish what needs to be done to restore the property to a condition in which it can be re-let.

Tenants taking on a new lease (commonly a full repairing and insuring lease) are likely to be obliged to accept the property in good order and repair or accept the property in a tenantable condition. The purpose of this is to transfer liability for certain common law obligations from the landlord to the tenant. When a property is accepted as being in good repair it must be returned to the landlord in that condition. Something doesn’t need to be in disrepair for there to be an obligation to put it into good repair. Conversely, Just because a property was in poor condition when you leased it doesn’t mean you can return it to the Landlord in no worse a state. It’s an expensive mistake to not fully appreciate the extent of your liability to repair.

Normally expert input in required in the form of a surveyor in order to prepare or respond to a schedule of dilapidations. On occasions, quantity surveyors, valuers and specialist mechanical and electrical engineers all have a role to play. Solicitors can assist in resolving disputes about the scope of repairing obligations. A commonly litigated issue relates to the landlord’s liability for extraordinary repairs and whether these have been competently transferred to the tenant. The wordings of repairing obligation clauses require to be analysed carefully because it can have significant implications for parties’ respective liabilities.

If you are considering entering into a commercial lease then consider obtaining expert dilapidations advice from the outset. Waiting until the end of a lease could result in unexpected expense, not just in terms of dilapidations but expert fees to resolve any dispute. If you require any advice or assistance please contact us online by clicking here or speak to a member of our specialist team on 0333 222 1855.

Van McKellar

Van McKellar

Dispute Resolution Team

“I see my role as a problem solver – seeking to understand the factual basis of my clients’ disputes and applying a legal and commercial analysis in seeking to resolve them, whether by negotiation or by means of litigation or some other alternative means of dispute resolution.”

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